ATLANTA-Industrial brokers had a banner leasing and sales year in 2005 and are expected to repeat the performance in 2006 as the 508-million-sf market roars to a third consecutive year of positive absorption, according to a new industry analysis by locally based Colliers Cauble & Co.

For the second year in a row, the industrial market topped the 12-million-sf absorption level with bulk warehouse space leading the charge and posting 9.2 million sf of positive leasing activity. Shallow-bay space followed with 2.58 million sf. Flex space recorded 208,104 sf.

Vacancy is down 0.9% from 2004. Over the past 24 months, the Colliers Cauble study finds vacant industrial square footage has dropped by over 10 million sf. But deliveries of new product in 2005 topped 17 million sf. In 2006, that figure will jump to 18.6 million sf. Industrial leasing and construction activity is on a three-year roll, says Scott Amoson, research director at Colliers Cauble.

"Bulk warehouse continues to be in high demand; build-to-suits show no sign of slowing; logistics firms have returned to the market; and smaller tenant activity between 20,000 sf and 80,000 sf remains strong," Amoson says. He predicts the market will end the year with 15 million sf of positive absorption, a record for Atlanta and most Southeast metro industrial markets.

Record bulk warehouse leasing deals were closed in 2005, the researcher notes. Home Depot Co. signed for one million sf in the South Atlanta submarket; PepsiCo is taking a 913,000 sf build-to-suit warehouse in the I-20 West submarket; and Progressive Lighting signed for 800,000 sf in the Northeast Atlanta submarket, as GlobeSt.com previously reported. "Large space users were the major force driving industrial space absorption in 2005," Amoson says.

However, "despite the positive outlook, the overwhelming number of deliveries scheduled for this year will present a challenge to the market," the researcher predicts. "Just over 18 million sf is set to deliver in 2006, only 35% of which is preleased," he notes. The vacant space to be added represents 31% of the overall vacant space currently in the Atlanta market. "Needless to say, vacancy rates are likely to rise in 2006."

Still, he concludes, "the brighter side to this is current market dynamics will suppress much of the onslaught of new space." He expects absorption levels "should be strong enough to fill at least half of this space." Amoson adds, Atlanta "continues to attract industrial space users due to its well-serviced regional location. As companies grow, the city will remain at the top of their lists for expansion."